Investec plans to tap unexplored markets

Publishing Date : 21 May, 2018

Author : TSHEPISO GABOTLHOMOLWE

Investec, an international specialist banking and asset management group which provides a range of financial products and services to a client base in three principal markets in the UK and Europe, Southern Africa, and Asia-Pacific has through its unconsolidated results highlighted that it is planning on tapping into unexplored markets while continuing to give good service to its client.

The entity listed in the Botswana Stock Exchange (BSE), Johannesburg Stock Exchange (JSE) and London stock Exchange (LSE) has registered an Ongoing operating profit which increased by 5.6 percent to GBP 701.0 million (2017: GBP663.7 million)― an increase of 1.2 percent on a currency neutral basis

The results show that statutory operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests increased 1.4 percent to GBP 607.5 million compared to GBP 599.1 million of 2017, a decrease of 3.5 percent on a currency neutral basis. They further highlighted that effective tax rate amounted to 9.6 percent compares to 2017’s 18.5 percent which was mainly impacted by the lower rate in South Africa following the release of provisions no longer required.

Their Statutory adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 10.1 percent from 48.3 pence to 53.2 pence, an increase of 4.1percent on a currency neutral basis. Ongoing adjusted EPS before goodwill, acquired intangibles and non-operating items increased 13.3 percent from 54.1 pence to 61.3 pence an increase of 8.1 percent on a currency neutral basis. The Group has also reported that annuity income as a percentage of total operating income amounted to 76.3 percent, an increase from 72.0 percent of 2017.

It has also been noted as compared to 2017’s 0.29 percent credit loss charge as a percentage of average gross core loans and advances amounted to 0.26 percent, remaining at the lower end of the group’s long term range despite an increase in impairments. Third party assets under management increased 6.5 percent to GBP160.6 billion compare to GBP150.7 billion on 31 March 2017, an increase of 6.2 percent on a currency neutral basis. The results highlight that Customer accounts (deposits) increased 6.5 percent to GBP31.0 billion (31 March 2017: GBP29.1 billion) an increase of 5.9 percent on a currency neutral basis.

Core loans and advances increased 11.6 percent to GBP24.8 billion (31 March 2017: GBP22.2 billion) -an increase of 11.0 percent on a currency neutral basis. The United Kingdom legacy portfolio continues to be actively managed down. The Group has noted that the Total balance sheet impairment allowance and provisions are expected to increase by approximately GBP106 million from GBP158 million as at 31 March 2018 to approximately GBP264 million as at 1 April 2018.

They noted that this is driven by an increase in legacy impairments of approximately GBP57 million and an increase in ongoing impairments of approximately GBP70 million, partially offset by a reduction of approximately GBP21 million as a result of changes in classification and measurement of certain of the group’s financial assets to fair value. The increase in impairment allowance and provisions is expected to reduce the CET 1 ratio by approximately 66bps on a fully loaded basis, or approximately 3bps on a day one impact transitional basis.

Chief Executive Officer (CEO) of Investec Stephen Koseff noted that over the last 40 years the firm has been building a platform that is capable of being leveraged for further growth. He highlighted that Investec is now a meaningful player across many business areas, both in the UK and South Africa. “We believe the platform is robust, relevant and well positioned for future value creation. We are confident that Hendrik du Toit and Fani Titi, as joint chief executives from October, will lead Investec to new successes for the benefit of shareholders and all our stakeholders”